The standing charge covers the cost of providing and maintaining the wires, pipes and cables that deliver power to your door, including the energy company’s staff and buildings.
It currently costs the average household 53p a day for electricity and 30p a day for gas, adding £303 a year to bills regardless of how much energy you use. The charge is covered by the energy price cap, which also sets a ceiling on how much suppliers can bill.
MoneySavingExpert.com founder Martin Lewis has campaigned for standing charges to be lowered, claiming they “unfairly penalise” households on lower incomes. “Outrageously, most people will pay £300 a year just for the facility of having gas and electricity, even if they don’t use any. “
High standing charges also discourage households from cutting back on energy usage as there is only so much you can save from doing so, he added.
Historically, customers on prepayment meters have paid higher standing charges than direct debit customers, which reflects the higher cost of serving them.
The Government is currently subsidising them through the Energy Price Guarantee but this support is due to expire at the end of March.
Lewis said many prepayment customers find themselves in debt in the summer because the meter has still been ticking over due to the standing charge. “This is a terrible, unnecessary situation for the most vulnerable.”
Last week, energy regulator Ofgem called on bill-payers and suppliers to give their views on the standing charge, and make proposals for alternatives.
Ofgem’s director for markets Tim Jarvis said the cost-of-living crisis has stirred up debate but warned that this is a complex issue. If the standing charge was cut or axed then suppliers would have to charge a higher price for every unit of power used.
This would penalise vulnerable households such as the elderly or disabled on low incomes who spend long periods at home and need to stay warm. “There is a difficult balance to be struck,” Jarvis said.
Standing charges are too high and the current approach is unfair, said Peter Smith from fuel poverty charity National Energy Action. “How can it be right that someone who can’t afford any energy for their home, still pays a daily charge that is the same or more than someone in a mansion? An overhaul is long overdue.”
Many on prepayment meters have cut energy usage to the point where it could be damaging their physical or mental health only to see standing charges double in recent years, Smith added. He called on Ofgem to reflect a customer’s usage and payment method when setting the standing charge.
Where you live also has a big impact on how much you pay, as people in North Wales and Mersey pay a third more a year than Londoners, said Ben Saltmarsh, National Energy Action’s head of Wales. “How can it be fair that areas across Great Britain that are more likely to struggle with their bills, pay so much more? Ofgem’s review should have a clear focus on reducing or eliminating these regional variances.”
It is possible to avoid paying it, though.
Utilita Energy says it is one of the only energy suppliers to have no standing charge at all. “This means you won’t pay anything if you don’t use any energy.”
Its Smart Energy tariff has two rates. Your energy gets cheaper when the Saver Rate automatically kicks in after you’ve used 64p a day.
This may suit low users or those whose properties stand empty for a large chunk of the year. Do your sums carefully, though.
Choosing a tariff with no standard charge will not help those with higher gas and electricity usage. Lack of supplier choice and higher unit energy costs could make this option more expensive.
Elsewhere, EDF has announced it will be rolling back “regressive” standing charges for its most vulnerable customers this winter as part of a £40million support package.
Its financial support will be applied to around 260,000 eligible customers’ accounts as a £30 credit in December.
Others have little choice but to pay up. Where standing charges are concerned, there are no easy answers.